December 01, 2003
Virage Logic's Adam Kablanian
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Peggy Aycinena - Contributing Editor

by Peggy Aycinena - Contributing Editor
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Conversing with Adam Kablanian, President and CEO at Virage Logic Corp. is easy. He's straightforward and relaxed, at least to the casual observer: “I was born in Syria and went to an Armenian high school there. The reason I'm here in the U.S., however, is because early on I developed a passion for physics. I wanted to know how physics worked, how astrophysics worked. And even though I could have gone to Aleppo to earn my doctorate and make a living, my dream was always to come to U.C. Berkeley to study and to become a physics professor.”

Kablanian did earn his degree in physics from Berkeley, in 1983, but veered from his dream of teaching to pursue a more pragmatic career in product development in Silicon Valley. “After graduating, I went to work at Xicor, which was one of the first companies to branch off from Intel. At that time, they were making memories. I spent two years in their Quality and Reliability group, which is where I learned that if you want to make a difference in a product, it has to be in the design - it's in the design where the innovation and new ideas lie. So I transferred to the design department at Xicor and began to pursue a graduate degree in Electrical Engineering from the University of Santa

He completed his masters in 1991, but admits that the years leading up to his graduation were difficult. “The main focus for me during those years was my career and my family. It was very, very tough to get up early in the morning to attend classes at Santa Clara, to pursue my career, to have a family, and to keep up with my studies. It was a relief when I was finally done.”

Kablanian spent five years at Xicor, followed by a brief sojourn at LSI Logic, and then spent five years at Waferscale Integration (WSI) where he spent his time “doing lots of Flash and EPROM memory design.” After WSI, he went back to LSI in a consulting capacity, and it was at this point that Kablanian decided to found Virage Logic.

He says, “By that time, I definitely had a great deal of expertise in memory design, while my time spent in consulting had helped me to figure out how to leverage my expertise. When we founded Virage, there were only a few companies in commercial IP. It was a fairly new industry at the time, but I felt that [the IP business model] was the best way for me to scale what I knew best. Alex Shubat, our CTO, has been with me since the beginning of the company in 1996. Although Alex had been at WSI for 10 years, where he was Director of Engineering, I convinced him that we could bootstrap Virage and more importantly that there was a market demand for embedded memory. It's true that the
situation in 1996 was a factor [in our decision to move forward with the company], but it was really the need that I had observed in the market for more embedded memories in SoCs [that prompted us to found Virage].”

“The first two years we were in business, we were mainly a consulting operation, providing services to companies, not products. As we worked with our customers, we developed the necessary software tools for our memories and we began to productize our IP - often with the help of those customers. For those first two years, our earnings were not substantial, although we were always able to meet the payroll for the 8 people in the company.”

Kbablanian says that Virage got the break they were looking for in 1998: “That was when PCM Sierra became our first IP customer, purchasing our .25-micron product. And they helped us to productize that IP, although the product was not yet robust. We were lucky to have PMC Sierra there to give us our first start in the memory compiler business.”

“In the IP business, nothing really happens in a rational way. We didn't have a business plan, we only had a vision which was to build the best products. Our concept was to become the embedded memory company. At the time, there were many, many library companies. The [wisdom at the time said that], in order to be successful, you had to be providing embedded memory and I/O, but we said we had to only provide embedded memory as our focus.”

“Something else that helped us at the time was the growth of the Internet. There was lots of demand in the late 1990's for more bandwidth, more switch fabric devices and other components, all of which needed more memory on-chip to get to the required performance. That helped to increase the demand for embedded memory and for our products - 1998, 99, 2000 were very good years for us. We had good traction with PMC and with MMC Networks, now part of AMCC. These were our first two customers in the networking and communication space. The rest of the companies in that industry were impressed that PMC and MMC were doing business with us, which in turn allowed us to gain traction in the

It was in this time frame that Artisan announced a new business model, one that offered 'free IP' to the industry. Kablanian says, “We never thought that the Artisan model was a big deal, although Artisan definitely took advantage of their IPO and a tremendous amount of cash. They thought they could eliminate the competition by providing free IP to users. In 1998, when they introduced that model, we were just introducing our first product, and we were actually growing our market while Artisan was giving things away. They had an established relationship with TSMC and other foundries, which made it somewhat difficult for us to convince our customers that we were offering quality.
However, here
we are today, still working successfully. I firmly believe that for any company that provides value with a differentiated product, you can succeed even if the competition is giving away product for free, or giving the perception that the product is free.”

“In early 1999, we received our first corporate funding - Round B raised close to $3.5 million. All of the companies involved wanted to collaborate with us on the technology side for both strategic and financial reasons. In late 1999, we received $10 million from Crosslink Capital. Mike Stark was on our board and was instrumental in attracting additional board members as we went through that very critical period. I'm very happy to say that they are all still on the board today. Six months later, we went public.”

“[It's important to note that] any company that has a large addressable market could go public then, or now, although the costs of course are different now. Publicly traded companies spend $3 million a year to remain public. If that's 15 percent of total revenues, the costs are not justified. You need to have scalable revenues because the auditing fees and the costs of director and officer insurance have really skyrocketed, [not to mention] the costs of being compliant with Sarbanes-Oxley. You have to hire external consultants to help you with that compliance, and more lawyers, and pay the higher charges of certifying the results. It all adds to the costs of running the company, plus
the time
management spends to make sure that things are in compliance. All of this takes away from time for pursuing additional revenues.”

“We went public in 2000 because we had real customers, real products, and we were making money, but we went public just after the burst of the Internet bubble. At the time, our investors told us that they were not pursuing 70 percent of their prospects, but that we shouldn't worry because we were definitely going public. After we went public in August 2000, we had parties in 5 different locations. By that time we had facilities in Fremont, California, in Bellevue, Washington, in New Jersey, in India on the outskirts of Delhi, and in Armenia. I visited each location over the course of the next year and celebrated with the local workforce and their families.”

“When we started the company in 1996, and were just a consulting shop, it was very difficult to recruit engineers in Silicon Valley. We had no funding, just an idea, and recognized that there was a big-time shortage of engineers. So we looked for talent from as far away as South Africa and India. We knew that for us to be successful in the long run, we had to plan for the long run. So even before we had funding, we were planning to diversify outside of Silicon Valley. Our universities here in the U.S. were not graduating a lot of technical people - which is a problem because you can't build a technical society without engineers and scientists.
Now, today, we need to emphasize more science and
engineering in the universities, although it's hard to motivate students [to pursue these disciplines] when, with the downturn, there are few jobs for engineers.”

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-- Peggy Aycinena, Contributing Editor.

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